Lawmakers to again consider oil and gas property changes

By: Katie Kuba/Staff Writer 1-22-18 - Updated: 9 months ago

Posted Jan 22, 2018

CHARLESTON — State legislators on both sides of the aisle think legislation that will make it easier for oil and natural gas companies to drill for resources — even when some property owners are unwilling to relinquish mineral rights — will pass during the 2018 legislative session.

At the West Virginia Press Association’s annual Legislative Lookahead earlier this month, both Del. Bill Anderson, R-Wood, and Sen. Glenn Jeffries, D-Putnam, said it’s likely the Legislature will pass some sort of “co-tenancy” legislation.

Co-tenancy permits natural gas drilling to take place on a tract of land owned by multiple people, so long as a certain percentage of those property owners, usually a majority, approve the drilling, even if other co-owners object.

Anderson and Jeffries were just two panelists among a group of seven that weighed in recently on potential legislation regarding oil and natural gas industry likely to surface during the 2018 legislative session, which began Wednesday, Jan. 10.

Moderator Christina Myer, executive editor of the Parkersburg News and Sentinel, asked Anderson and Jeffries about their vision for oil and gas legislation, and despite their political differences, both legislators agreed that passing co-tenancy legislation was a top priority.

“We need to enact and get the governor to sign co-tenancy legislation,” Anderson said. “I believe that would simplify the process … that is making it very difficult to find some of the missing [property] owners that may have had an interest in minerals that have been passed down over the generations.”

Anderson is referring to what industry officials call“non-locatables,” or owners companies are unable to find.

Anderson said legislation creating more “transparency” that would allow royalty owners to access “information about the production and information about sales prices … and any deductions that are taken from their checks” should also be a priority for the Legislature.

Jeffries echoed Anderson’s confidence about the success of co-tenancy legislation passing, saying he was “pretty certain” such a law would pass.

In 2017, a drilling bill that incorporated a co-tenancy provision died after leaders of the House of Delegates thought there wasn’t enough time to garner sufficient support for the bill, according to a Charleston Gazette-Mail article. Another bill involving multiple tracts of land — referred to as a “forced pooling” bill — was likewise unsuccessful in 2015, according to the article.

Anne Blankenship, executive director of West Virginia Oil and Natural Gas Association, said she was happy the industry and legislators were going into the session “on the same page.”

Co-tenancy is WVONGA’s top legislative priority, she said.

“It helps when you don’t have 100 percent of agreement from mineral interest owners in order to join tracts of land and fully produce oil and gas,” Blankenship said. “It’s important because in some tracts of land, you can have hundreds of mineral interest owners, and right now in West Virginia, if half of 1 percent of that mineral interest owner doesn’t approve it for production, then it can’t happen and it’s holding us back.”

Blankenship added that West Virginia is one of the only major oil and natural gas production states that hasn’t passed a co-tenancy law.

“We feel that this is a fair way to deal with the issue,” she said. “It’s absolutely necessary to get us where we need to be in the industry.”

Meyer asked Blankenship and Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, to explain the difference between co-tenancy and “forced pooling.”

Burd said the difference between “forced pooling” and co-tenancy is that while pooling refers to combining multiple tracts of land, co-tenancy pertains to an individual plat of land, the mineral rights of which might belong to multiple owners.

“Co-tenancy deals with a single tract of land, and that single tract of land could have been passed down through generations from your great-grandfather, who originally owned it to his sons to their sons to you, and there might be 15 or 20 people now who have ownership in that tract of land,” Burd explained. “If you have one — just one — that would refuse to develop that tract of land under our current law, you wouldn’t be able to include that tract of land.”

Burd said that in states such as Wyoming and North Dakota, the opposite is the case: if just one of many mineral rights owners wants to develop a tract of land, under law, drilling can take place on the land.

Blankenship said, “The big difference between co-tenancy and pooling is that pooling looks at the entire unit … which is made up of multiple tracts of land and that unit has to be formed in order for an oil and gas company to be able to drill.

“Co-tenancy does not look at the unit as a whole but looks at each individual tract, so it looks at it in a more closely defined area,” she continued. “Obviously, this is a property rights issue, it’s a sensitive issue or else it wouldn’t have taken this long for something to have passed the Legislature.”

Blankenship added that the “key point” of co-tenancy is that non-consenting co-tenants will be compensated well.

“This is not a situation where the rights are being taken from someone that doesn’t want the production to occur,” she said. “In fact, it’s just the opposite. It is allowing the ‘majority rules’ kind of concept. Right now, that’s not in place, and it’s not only hurting the oil and gas companies, more importantly, it’s hurting the other royalty owners because they’re not able to take full advantage of their mineral rights.”

Blankenship, Burd and Steve Hedrick — CEO of the Mid-Atlantic Technology, Research and Innovation Center — expressed enthusiasm about the recent memorandum of understanding signed by China Energy Investment Corp., which plans to invest $83.7 billion in shale gas, power and chemical products in West Virginia. Hedrick said CEIC has is making a long-term investment in the state to develop the chemical industry “in a safe and environmentally sound way.”

Gov. Jim Justice, in his State of the State address Wednesday, Jan. 10, expressed enthusiasm about co-tenancy legislation passing as well as the deal with CEIC.

However, Angie Rosser, executive director of the West Virginia Rivers Coalition, said there are many unanswered questions swirling around the Chinese company’s investment.

“This idea of a foreign entity investing this much money, I mean I’ve heard people talk about, it feels like they’re buying West Virginia,” Rosser said. “So there needs to be a lot more explanation about what this investment means for the people of West Virginia and what we really get out of it for the long term.”

Rosser said the government should have learned from lessons from its experiences with some foreign-owned coal companies.

“We can take the coal industry, where we’ve had companies —some of them foreign-owned —who have gotten the coal out and then they’ve gotten out of West Virginia, and we’re left with the cleanup and we’re left with billions of dollars of liability in this state from abandoned mine lands,” Rosser said.

“The lesson learned from this is, ‘How did we let that happen?’ Avoid the temptation to just think about the short-term fix, about what’s going to be a shot in the arm to the West Virginia economy … but to think down the line and about the long-term consequences of, ‘What are we setting ourselves up for?’”